The early release of superannuation should not be used to fund gaps in other government policy areas, particularly healthcare and income support, according to major superannuation lobby group the Association of Superannuation Funds of Australia (ASFA).
In a submission responding to Treasury’s Review of the Early Release of Superannuation Benefits, ASFA has made clear that while it supports the early release of superannuation in some cases, it does not believe it should occur just because the Government has not adequately funded some social welfare areas.
“Our overarching observation is that the sole purpose of the superannuation system is to save and invest to produce an income in retirement and, accordingly, it should not be used to fund gaps in other policy areas – in particular healthcare and income support,” the submission said.
“To the extent that superannuation is accessed early it will have the effect of reducing the amount available in retirement, which is likely to increase the reliance on the age pension in future. This means future taxpayers effectively will be subsidising the member’s current expenditure, which is grounds for ensuring early access to superannuation should be restricted to circumstances where it is essential to do so.”
“Acknowledging that some people will need early access to their superannuation, the current level of superannuation benefits generally is not sufficient to cater both for present needs, such as healthcare, and needs in retirement,” the ASFA submission said. “Accordingly, if there is a significant increase in amount of superannuation accessed early, the level of contribution to superannuation will need to increase to compensate for this.”
The submission argued that there were. and would always be, cases where early access to superannuation could be justified but added that given that superannuation was for retirement, there should be stringent controls over enabling such access.
“The main issues are whether there is a genuine and immediate financial need and whether the member may have access to financial resources outside superannuation. There is an argument that all options should be explored prior to granting early access to superannuation, including whether a member has access to other assets that could be utilised or could look at consolidating/refinancing debts,” it said.
“In addition, to make it easier for members and advisers to understand a member’s potential eligibility for early access, and to minimise the compliance burden on affected stakeholders, we recommend making the criteria as objective and clear as possible, while retaining an appropriate degree of flexibility and discretion to provide for different circumstances.”